WTI rallies back to $105.00s from brief dip under $100 as focus returns to geopolitics

• Oil is on the front foot on Wednesday with geopolitics in focus amid disruption to gas flows to Europe via Ukraine.
• WTI has rallied nearly $6.0 on the day to the $105.00s, though is still down over $5.0 on the week.

Global oil prices, though still substantially lower on the week, have seen solid gains on Wednesday, with front-month WTI futures posting an aggressive recovery from earlier session lows underneath the $100 per barrel mark. WTI is now trading above the $105.00 level, still about $5.0 below earlier weekly highs, but up nearly $6.0 on the day.

The ongoing downturn in global equity markets (led by US tech) as investors fret about central bank tightening amid still sky-high inflation and a slowing global growth impulse can be attributed as causing the pullback from recent highs above $110. But fears about supply shortages as a result of the Russo-Ukraine war continue to entice dip-buying upon retests of the $100 level.

Those fears have been in focus in recent weeks as the EU wrangles its way closer to an agreement on a ban on all Russian oil imports, a move that commodity strategists think would be devastating to the country’s producers. Hungary is for now blocking a final deal on the embargo, the latest reporting on the issue suggests, but it seems a compromise is soon likely to be reached.

Meanwhile, gas flows to Europe via Ukraine have been disrupted for the first time amid alleged interference in a major transit route by occupying Russian forces (so Ukraine says), marking the first disruption to gas flows in the country since the war started two and a half months ago. This is likely also to be giving oil markets some support on Wednesday.

WTI bulls will be hoping for a retest of recent highs above $110 in the coming days, though so long as broader risk appetite remains on the ropes, this will be a difficult task to manage. In the immediate future, crude oil traders will be monitoring official weekly US crude oil inventory data out at 1530BST after private weekly inventory data on Tuesday showed a surprise build.